HB3157 EnrolledLRB098 10600 HLH 40863 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Income Tax Act is amended by
5changing Sections 304, 502, and 709.5 as follows:
 
6    (35 ILCS 5/304)  (from Ch. 120, par. 3-304)
7    Sec. 304. Business income of persons other than residents.
8    (a) In general. The business income of a person other than
9a resident shall be allocated to this State if such person's
10business income is derived solely from this State. If a person
11other than a resident derives business income from this State
12and one or more other states, then, for tax years ending on or
13before December 30, 1998, and except as otherwise provided by
14this Section, such person's business income shall be
15apportioned to this State by multiplying the income by a
16fraction, the numerator of which is the sum of the property
17factor (if any), the payroll factor (if any) and 200% of the
18sales factor (if any), and the denominator of which is 4
19reduced by the number of factors other than the sales factor
20which have a denominator of zero and by an additional 2 if the
21sales factor has a denominator of zero. For tax years ending on
22or after December 31, 1998, and except as otherwise provided by
23this Section, persons other than residents who derive business

 

 

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1income from this State and one or more other states shall
2compute their apportionment factor by weighting their
3property, payroll, and sales factors as provided in subsection
4(h) of this Section.
5    (1) Property factor.
6        (A) The property factor is a fraction, the numerator of
7    which is the average value of the person's real and
8    tangible personal property owned or rented and used in the
9    trade or business in this State during the taxable year and
10    the denominator of which is the average value of all the
11    person's real and tangible personal property owned or
12    rented and used in the trade or business during the taxable
13    year.
14        (B) Property owned by the person is valued at its
15    original cost. Property rented by the person is valued at 8
16    times the net annual rental rate. Net annual rental rate is
17    the annual rental rate paid by the person less any annual
18    rental rate received by the person from sub-rentals.
19        (C) The average value of property shall be determined
20    by averaging the values at the beginning and ending of the
21    taxable year but the Director may require the averaging of
22    monthly values during the taxable year if reasonably
23    required to reflect properly the average value of the
24    person's property.
25    (2) Payroll factor.
26        (A) The payroll factor is a fraction, the numerator of

 

 

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1    which is the total amount paid in this State during the
2    taxable year by the person for compensation, and the
3    denominator of which is the total compensation paid
4    everywhere during the taxable year.
5        (B) Compensation is paid in this State if:
6            (i) The individual's service is performed entirely
7        within this State;
8            (ii) The individual's service is performed both
9        within and without this State, but the service
10        performed without this State is incidental to the
11        individual's service performed within this State; or
12            (iii) Some of the service is performed within this
13        State and either the base of operations, or if there is
14        no base of operations, the place from which the service
15        is directed or controlled is within this State, or the
16        base of operations or the place from which the service
17        is directed or controlled is not in any state in which
18        some part of the service is performed, but the
19        individual's residence is in this State.
20            (iv) Compensation paid to nonresident professional
21        athletes.
22            (a) General. The Illinois source income of a
23        nonresident individual who is a member of a
24        professional athletic team includes the portion of the
25        individual's total compensation for services performed
26        as a member of a professional athletic team during the

 

 

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1        taxable year which the number of duty days spent within
2        this State performing services for the team in any
3        manner during the taxable year bears to the total
4        number of duty days spent both within and without this
5        State during the taxable year.
6            (b) Travel days. Travel days that do not involve
7        either a game, practice, team meeting, or other similar
8        team event are not considered duty days spent in this
9        State. However, such travel days are considered in the
10        total duty days spent both within and without this
11        State.
12            (c) Definitions. For purposes of this subpart
13        (iv):
14                (1) The term "professional athletic team"
15            includes, but is not limited to, any professional
16            baseball, basketball, football, soccer, or hockey
17            team.
18                (2) The term "member of a professional
19            athletic team" includes those employees who are
20            active players, players on the disabled list, and
21            any other persons required to travel and who travel
22            with and perform services on behalf of a
23            professional athletic team on a regular basis.
24            This includes, but is not limited to, coaches,
25            managers, and trainers.
26                (3) Except as provided in items (C) and (D) of

 

 

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1            this subpart (3), the term "duty days" means all
2            days during the taxable year from the beginning of
3            the professional athletic team's official
4            pre-season training period through the last game
5            in which the team competes or is scheduled to
6            compete. Duty days shall be counted for the year in
7            which they occur, including where a team's
8            official pre-season training period through the
9            last game in which the team competes or is
10            scheduled to compete, occurs during more than one
11            tax year.
12                    (A) Duty days shall also include days on
13                which a member of a professional athletic team
14                performs service for a team on a date that does
15                not fall within the foregoing period (e.g.,
16                participation in instructional leagues, the
17                "All Star Game", or promotional "caravans").
18                Performing a service for a professional
19                athletic team includes conducting training and
20                rehabilitation activities, when such
21                activities are conducted at team facilities.
22                    (B) Also included in duty days are game
23                days, practice days, days spent at team
24                meetings, promotional caravans, preseason
25                training camps, and days served with the team
26                through all post-season games in which the team

 

 

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1                competes or is scheduled to compete.
2                    (C) Duty days for any person who joins a
3                team during the period from the beginning of
4                the professional athletic team's official
5                pre-season training period through the last
6                game in which the team competes, or is
7                scheduled to compete, shall begin on the day
8                that person joins the team. Conversely, duty
9                days for any person who leaves a team during
10                this period shall end on the day that person
11                leaves the team. Where a person switches teams
12                during a taxable year, a separate duty-day
13                calculation shall be made for the period the
14                person was with each team.
15                    (D) Days for which a member of a
16                professional athletic team is not compensated
17                and is not performing services for the team in
18                any manner, including days when such member of
19                a professional athletic team has been
20                suspended without pay and prohibited from
21                performing any services for the team, shall not
22                be treated as duty days.
23                    (E) Days for which a member of a
24                professional athletic team is on the disabled
25                list and does not conduct rehabilitation
26                activities at facilities of the team, and is

 

 

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1                not otherwise performing services for the team
2                in Illinois, shall not be considered duty days
3                spent in this State. All days on the disabled
4                list, however, are considered to be included in
5                total duty days spent both within and without
6                this State.
7                (4) The term "total compensation for services
8            performed as a member of a professional athletic
9            team" means the total compensation received during
10            the taxable year for services performed:
11                    (A) from the beginning of the official
12                pre-season training period through the last
13                game in which the team competes or is scheduled
14                to compete during that taxable year; and
15                    (B) during the taxable year on a date which
16                does not fall within the foregoing period
17                (e.g., participation in instructional leagues,
18                the "All Star Game", or promotional caravans).
19                This compensation shall include, but is not
20            limited to, salaries, wages, bonuses as described
21            in this subpart, and any other type of compensation
22            paid during the taxable year to a member of a
23            professional athletic team for services performed
24            in that year. This compensation does not include
25            strike benefits, severance pay, termination pay,
26            contract or option year buy-out payments,

 

 

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1            expansion or relocation payments, or any other
2            payments not related to services performed for the
3            team.
4                For purposes of this subparagraph, "bonuses"
5            included in "total compensation for services
6            performed as a member of a professional athletic
7            team" subject to the allocation described in
8            Section 302(c)(1) are: bonuses earned as a result
9            of play (i.e., performance bonuses) during the
10            season, including bonuses paid for championship,
11            playoff or "bowl" games played by a team, or for
12            selection to all-star league or other honorary
13            positions; and bonuses paid for signing a
14            contract, unless the payment of the signing bonus
15            is not conditional upon the signee playing any
16            games for the team or performing any subsequent
17            services for the team or even making the team, the
18            signing bonus is payable separately from the
19            salary and any other compensation, and the signing
20            bonus is nonrefundable.
21    (3) Sales factor.
22        (A) The sales factor is a fraction, the numerator of
23    which is the total sales of the person in this State during
24    the taxable year, and the denominator of which is the total
25    sales of the person everywhere during the taxable year.
26        (B) Sales of tangible personal property are in this

 

 

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1    State if:
2            (i) The property is delivered or shipped to a
3        purchaser, other than the United States government,
4        within this State regardless of the f. o. b. point or
5        other conditions of the sale; or
6            (ii) The property is shipped from an office, store,
7        warehouse, factory or other place of storage in this
8        State and either the purchaser is the United States
9        government or the person is not taxable in the state of
10        the purchaser; provided, however, that premises owned
11        or leased by a person who has independently contracted
12        with the seller for the printing of newspapers,
13        periodicals or books shall not be deemed to be an
14        office, store, warehouse, factory or other place of
15        storage for purposes of this Section. Sales of tangible
16        personal property are not in this State if the seller
17        and purchaser would be members of the same unitary
18        business group but for the fact that either the seller
19        or purchaser is a person with 80% or more of total
20        business activity outside of the United States and the
21        property is purchased for resale.
22        (B-1) Patents, copyrights, trademarks, and similar
23    items of intangible personal property.
24            (i) Gross receipts from the licensing, sale, or
25        other disposition of a patent, copyright, trademark,
26        or similar item of intangible personal property, other

 

 

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1        than gross receipts governed by paragraph (B-7) of this
2        item (3), are in this State to the extent the item is
3        utilized in this State during the year the gross
4        receipts are included in gross income.
5            (ii) Place of utilization.
6                (I) A patent is utilized in a state to the
7            extent that it is employed in production,
8            fabrication, manufacturing, or other processing in
9            the state or to the extent that a patented product
10            is produced in the state. If a patent is utilized
11            in more than one state, the extent to which it is
12            utilized in any one state shall be a fraction equal
13            to the gross receipts of the licensee or purchaser
14            from sales or leases of items produced,
15            fabricated, manufactured, or processed within that
16            state using the patent and of patented items
17            produced within that state, divided by the total of
18            such gross receipts for all states in which the
19            patent is utilized.
20                (II) A copyright is utilized in a state to the
21            extent that printing or other publication
22            originates in the state. If a copyright is utilized
23            in more than one state, the extent to which it is
24            utilized in any one state shall be a fraction equal
25            to the gross receipts from sales or licenses of
26            materials printed or published in that state

 

 

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1            divided by the total of such gross receipts for all
2            states in which the copyright is utilized.
3                (III) Trademarks and other items of intangible
4            personal property governed by this paragraph (B-1)
5            are utilized in the state in which the commercial
6            domicile of the licensee or purchaser is located.
7            (iii) If the state of utilization of an item of
8        property governed by this paragraph (B-1) cannot be
9        determined from the taxpayer's books and records or
10        from the books and records of any person related to the
11        taxpayer within the meaning of Section 267(b) of the
12        Internal Revenue Code, 26 U.S.C. 267, the gross
13        receipts attributable to that item shall be excluded
14        from both the numerator and the denominator of the
15        sales factor.
16        (B-2) Gross receipts from the license, sale, or other
17    disposition of patents, copyrights, trademarks, and
18    similar items of intangible personal property, other than
19    gross receipts governed by paragraph (B-7) of this item
20    (3), may be included in the numerator or denominator of the
21    sales factor only if gross receipts from licenses, sales,
22    or other disposition of such items comprise more than 50%
23    of the taxpayer's total gross receipts included in gross
24    income during the tax year and during each of the 2
25    immediately preceding tax years; provided that, when a
26    taxpayer is a member of a unitary business group, such

 

 

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1    determination shall be made on the basis of the gross
2    receipts of the entire unitary business group.
3        (B-5) For taxable years ending on or after December 31,
4    2008, except as provided in subsections (ii) through (vii),
5    receipts from the sale of telecommunications service or
6    mobile telecommunications service are in this State if the
7    customer's service address is in this State.
8            (i) For purposes of this subparagraph (B-5), the
9        following terms have the following meanings:
10            "Ancillary services" means services that are
11        associated with or incidental to the provision of
12        "telecommunications services", including but not
13        limited to "detailed telecommunications billing",
14        "directory assistance", "vertical service", and "voice
15        mail services".
16            "Air-to-Ground Radiotelephone service" means a
17        radio service, as that term is defined in 47 CFR 22.99,
18        in which common carriers are authorized to offer and
19        provide radio telecommunications service for hire to
20        subscribers in aircraft.
21            "Call-by-call Basis" means any method of charging
22        for telecommunications services where the price is
23        measured by individual calls.
24            "Communications Channel" means a physical or
25        virtual path of communications over which signals are
26        transmitted between or among customer channel

 

 

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1        termination points.
2            "Conference bridging service" means an "ancillary
3        service" that links two or more participants of an
4        audio or video conference call and may include the
5        provision of a telephone number. "Conference bridging
6        service" does not include the "telecommunications
7        services" used to reach the conference bridge.
8            "Customer Channel Termination Point" means the
9        location where the customer either inputs or receives
10        the communications.
11            "Detailed telecommunications billing service"
12        means an "ancillary service" of separately stating
13        information pertaining to individual calls on a
14        customer's billing statement.
15            "Directory assistance" means an "ancillary
16        service" of providing telephone number information,
17        and/or address information.
18            "Home service provider" means the facilities based
19        carrier or reseller with which the customer contracts
20        for the provision of mobile telecommunications
21        services.
22            "Mobile telecommunications service" means
23        commercial mobile radio service, as defined in Section
24        20.3 of Title 47 of the Code of Federal Regulations as
25        in effect on June 1, 1999.
26            "Place of primary use" means the street address

 

 

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1        representative of where the customer's use of the
2        telecommunications service primarily occurs, which
3        must be the residential street address or the primary
4        business street address of the customer. In the case of
5        mobile telecommunications services, "place of primary
6        use" must be within the licensed service area of the
7        home service provider.
8            "Post-paid telecommunication service" means the
9        telecommunications service obtained by making a
10        payment on a call-by-call basis either through the use
11        of a credit card or payment mechanism such as a bank
12        card, travel card, credit card, or debit card, or by
13        charge made to a telephone number which is not
14        associated with the origination or termination of the
15        telecommunications service. A post-paid calling
16        service includes telecommunications service, except a
17        prepaid wireless calling service, that would be a
18        prepaid calling service except it is not exclusively a
19        telecommunication service.
20            "Prepaid telecommunication service" means the
21        right to access exclusively telecommunications
22        services, which must be paid for in advance and which
23        enables the origination of calls using an access number
24        or authorization code, whether manually or
25        electronically dialed, and that is sold in
26        predetermined units or dollars of which the number

 

 

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1        declines with use in a known amount.
2            "Prepaid Mobile telecommunication service" means a
3        telecommunications service that provides the right to
4        utilize mobile wireless service as well as other
5        non-telecommunication services, including but not
6        limited to ancillary services, which must be paid for
7        in advance that is sold in predetermined units or
8        dollars of which the number declines with use in a
9        known amount.
10            "Private communication service" means a
11        telecommunication service that entitles the customer
12        to exclusive or priority use of a communications
13        channel or group of channels between or among
14        termination points, regardless of the manner in which
15        such channel or channels are connected, and includes
16        switching capacity, extension lines, stations, and any
17        other associated services that are provided in
18        connection with the use of such channel or channels.
19            "Service address" means:
20                (a) The location of the telecommunications
21            equipment to which a customer's call is charged and
22            from which the call originates or terminates,
23            regardless of where the call is billed or paid;
24                (b) If the location in line (a) is not known,
25            service address means the origination point of the
26            signal of the telecommunications services first

 

 

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1            identified by either the seller's
2            telecommunications system or in information
3            received by the seller from its service provider
4            where the system used to transport such signals is
5            not that of the seller; and
6                (c) If the locations in line (a) and line (b)
7            are not known, the service address means the
8            location of the customer's place of primary use.
9            "Telecommunications service" means the electronic
10        transmission, conveyance, or routing of voice, data,
11        audio, video, or any other information or signals to a
12        point, or between or among points. The term
13        "telecommunications service" includes such
14        transmission, conveyance, or routing in which computer
15        processing applications are used to act on the form,
16        code or protocol of the content for purposes of
17        transmission, conveyance or routing without regard to
18        whether such service is referred to as voice over
19        Internet protocol services or is classified by the
20        Federal Communications Commission as enhanced or value
21        added. "Telecommunications service" does not include:
22                (a) Data processing and information services
23            that allow data to be generated, acquired, stored,
24            processed, or retrieved and delivered by an
25            electronic transmission to a purchaser when such
26            purchaser's primary purpose for the underlying

 

 

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1            transaction is the processed data or information;
2                (b) Installation or maintenance of wiring or
3            equipment on a customer's premises;
4                (c) Tangible personal property;
5                (d) Advertising, including but not limited to
6            directory advertising.
7                (e) Billing and collection services provided
8            to third parties;
9                (f) Internet access service;
10                (g) Radio and television audio and video
11            programming services, regardless of the medium,
12            including the furnishing of transmission,
13            conveyance and routing of such services by the
14            programming service provider. Radio and television
15            audio and video programming services shall include
16            but not be limited to cable service as defined in
17            47 USC 522(6) and audio and video programming
18            services delivered by commercial mobile radio
19            service providers, as defined in 47 CFR 20.3;
20                (h) "Ancillary services"; or
21                (i) Digital products "delivered
22            electronically", including but not limited to
23            software, music, video, reading materials or ring
24            tones.
25            "Vertical service" means an "ancillary service"
26        that is offered in connection with one or more

 

 

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1        "telecommunications services", which offers advanced
2        calling features that allow customers to identify
3        callers and to manage multiple calls and call
4        connections, including "conference bridging services".
5            "Voice mail service" means an "ancillary service"
6        that enables the customer to store, send or receive
7        recorded messages. "Voice mail service" does not
8        include any "vertical services" that the customer may
9        be required to have in order to utilize the "voice mail
10        service".
11            (ii) Receipts from the sale of telecommunications
12        service sold on an individual call-by-call basis are in
13        this State if either of the following applies:
14                (a) The call both originates and terminates in
15            this State.
16                (b) The call either originates or terminates
17            in this State and the service address is located in
18            this State.
19            (iii) Receipts from the sale of postpaid
20        telecommunications service at retail are in this State
21        if the origination point of the telecommunication
22        signal, as first identified by the service provider's
23        telecommunication system or as identified by
24        information received by the seller from its service
25        provider if the system used to transport
26        telecommunication signals is not the seller's, is

 

 

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1        located in this State.
2            (iv) Receipts from the sale of prepaid
3        telecommunications service or prepaid mobile
4        telecommunications service at retail are in this State
5        if the purchaser obtains the prepaid card or similar
6        means of conveyance at a location in this State.
7        Receipts from recharging a prepaid telecommunications
8        service or mobile telecommunications service is in
9        this State if the purchaser's billing information
10        indicates a location in this State.
11            (v) Receipts from the sale of private
12        communication services are in this State as follows:
13                (a) 100% of receipts from charges imposed at
14            each channel termination point in this State.
15                (b) 100% of receipts from charges for the total
16            channel mileage between each channel termination
17            point in this State.
18                (c) 50% of the total receipts from charges for
19            service segments when those segments are between 2
20            customer channel termination points, 1 of which is
21            located in this State and the other is located
22            outside of this State, which segments are
23            separately charged.
24                (d) The receipts from charges for service
25            segments with a channel termination point located
26            in this State and in two or more other states, and

 

 

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1            which segments are not separately billed, are in
2            this State based on a percentage determined by
3            dividing the number of customer channel
4            termination points in this State by the total
5            number of customer channel termination points.
6            (vi) Receipts from charges for ancillary services
7        for telecommunications service sold to customers at
8        retail are in this State if the customer's primary
9        place of use of telecommunications services associated
10        with those ancillary services is in this State. If the
11        seller of those ancillary services cannot determine
12        where the associated telecommunications are located,
13        then the ancillary services shall be based on the
14        location of the purchaser.
15            (vii) Receipts to access a carrier's network or
16        from the sale of telecommunication services or
17        ancillary services for resale are in this State as
18        follows:
19                (a) 100% of the receipts from access fees
20            attributable to intrastate telecommunications
21            service that both originates and terminates in
22            this State.
23                (b) 50% of the receipts from access fees
24            attributable to interstate telecommunications
25            service if the interstate call either originates
26            or terminates in this State.

 

 

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1                (c) 100% of the receipts from interstate end
2            user access line charges, if the customer's
3            service address is in this State. As used in this
4            subdivision, "interstate end user access line
5            charges" includes, but is not limited to, the
6            surcharge approved by the federal communications
7            commission and levied pursuant to 47 CFR 69.
8                (d) Gross receipts from sales of
9            telecommunication services or from ancillary
10            services for telecommunications services sold to
11            other telecommunication service providers for
12            resale shall be sourced to this State using the
13            apportionment concepts used for non-resale
14            receipts of telecommunications services if the
15            information is readily available to make that
16            determination. If the information is not readily
17            available, then the taxpayer may use any other
18            reasonable and consistent method.
19        (B-7) For taxable years ending on or after December 31,
20    2008, receipts from the sale of broadcasting services are
21    in this State if the broadcasting services are received in
22    this State. For purposes of this paragraph (B-7), the
23    following terms have the following meanings:
24            "Advertising revenue" means consideration received
25        by the taxpayer in exchange for broadcasting services
26        or allowing the broadcasting of commercials or

 

 

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1        announcements in connection with the broadcasting of
2        film or radio programming, from sponsorships of the
3        programming, or from product placements in the
4        programming.
5            "Audience factor" means the ratio that the
6        audience or subscribers located in this State of a
7        station, a network, or a cable system bears to the
8        total audience or total subscribers for that station,
9        network, or cable system. The audience factor for film
10        or radio programming shall be determined by reference
11        to the books and records of the taxpayer or by
12        reference to published rating statistics provided the
13        method used by the taxpayer is consistently used from
14        year to year for this purpose and fairly represents the
15        taxpayer's activity in this State.
16            "Broadcast" or "broadcasting" or "broadcasting
17        services" means the transmission or provision of film
18        or radio programming, whether through the public
19        airwaves, by cable, by direct or indirect satellite
20        transmission, or by any other means of communication,
21        either through a station, a network, or a cable system.
22            "Film" or "film programming" means the broadcast
23        on television of any and all performances, events, or
24        productions, including but not limited to news,
25        sporting events, plays, stories, or other literary,
26        commercial, educational, or artistic works, either

 

 

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1        live or through the use of video tape, disc, or any
2        other type of format or medium. Each episode of a
3        series of films produced for television shall
4        constitute separate "film" notwithstanding that the
5        series relates to the same principal subject and is
6        produced during one or more tax periods.
7            "Radio" or "radio programming" means the broadcast
8        on radio of any and all performances, events, or
9        productions, including but not limited to news,
10        sporting events, plays, stories, or other literary,
11        commercial, educational, or artistic works, either
12        live or through the use of an audio tape, disc, or any
13        other format or medium. Each episode in a series of
14        radio programming produced for radio broadcast shall
15        constitute a separate "radio programming"
16        notwithstanding that the series relates to the same
17        principal subject and is produced during one or more
18        tax periods.
19                (i) In the case of advertising revenue from
20            broadcasting, the customer is the advertiser and
21            the service is received in this State if the
22            commercial domicile of the advertiser is in this
23            State.
24                (ii) In the case where film or radio
25            programming is broadcast by a station, a network,
26            or a cable system for a fee or other remuneration

 

 

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1            received from the recipient of the broadcast, the
2            portion of the service that is received in this
3            State is measured by the portion of the recipients
4            of the broadcast located in this State.
5            Accordingly, the fee or other remuneration for
6            such service that is included in the Illinois
7            numerator of the sales factor is the total of those
8            fees or other remuneration received from
9            recipients in Illinois. For purposes of this
10            paragraph, a taxpayer may determine the location
11            of the recipients of its broadcast using the
12            address of the recipient shown in its contracts
13            with the recipient or using the billing address of
14            the recipient in the taxpayer's records.
15                (iii) In the case where film or radio
16            programming is broadcast by a station, a network,
17            or a cable system for a fee or other remuneration
18            from the person providing the programming, the
19            portion of the broadcast service that is received
20            by such station, network, or cable system in this
21            State is measured by the portion of recipients of
22            the broadcast located in this State. Accordingly,
23            the amount of revenue related to such an
24            arrangement that is included in the Illinois
25            numerator of the sales factor is the total fee or
26            other total remuneration from the person providing

 

 

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1            the programming related to that broadcast
2            multiplied by the Illinois audience factor for
3            that broadcast.
4                (iv) In the case where film or radio
5            programming is provided by a taxpayer that is a
6            network or station to a customer for broadcast in
7            exchange for a fee or other remuneration from that
8            customer the broadcasting service is received at
9            the location of the office of the customer from
10            which the services were ordered in the regular
11            course of the customer's trade or business.
12            Accordingly, in such a case the revenue derived by
13            the taxpayer that is included in the taxpayer's
14            Illinois numerator of the sales factor is the
15            revenue from such customers who receive the
16            broadcasting service in Illinois.
17                (v) In the case where film or radio programming
18            is provided by a taxpayer that is not a network or
19            station to another person for broadcasting in
20            exchange for a fee or other remuneration from that
21            person, the broadcasting service is received at
22            the location of the office of the customer from
23            which the services were ordered in the regular
24            course of the customer's trade or business.
25            Accordingly, in such a case the revenue derived by
26            the taxpayer that is included in the taxpayer's

 

 

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1            Illinois numerator of the sales factor is the
2            revenue from such customers who receive the
3            broadcasting service in Illinois.
4        (C) For taxable years ending before December 31, 2008,
5    sales, other than sales governed by paragraphs (B), (B-1),
6    and (B-2), are in this State if:
7            (i) The income-producing activity is performed in
8        this State; or
9            (ii) The income-producing activity is performed
10        both within and without this State and a greater
11        proportion of the income-producing activity is
12        performed within this State than without this State,
13        based on performance costs.
14        (C-5) For taxable years ending on or after December 31,
15    2008, sales, other than sales governed by paragraphs (B),
16    (B-1), (B-2), (B-5), and (B-7), are in this State if any of
17    the following criteria are met:
18            (i) Sales from the sale or lease of real property
19        are in this State if the property is located in this
20        State.
21            (ii) Sales from the lease or rental of tangible
22        personal property are in this State if the property is
23        located in this State during the rental period. Sales
24        from the lease or rental of tangible personal property
25        that is characteristically moving property, including,
26        but not limited to, motor vehicles, rolling stock,

 

 

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1        aircraft, vessels, or mobile equipment are in this
2        State to the extent that the property is used in this
3        State.
4            (iii) In the case of interest, net gains (but not
5        less than zero) and other items of income from
6        intangible personal property, the sale is in this State
7        if:
8                (a) in the case of a taxpayer who is a dealer
9            in the item of intangible personal property within
10            the meaning of Section 475 of the Internal Revenue
11            Code, the income or gain is received from a
12            customer in this State. For purposes of this
13            subparagraph, a customer is in this State if the
14            customer is an individual, trust or estate who is a
15            resident of this State and, for all other
16            customers, if the customer's commercial domicile
17            is in this State. Unless the dealer has actual
18            knowledge of the residence or commercial domicile
19            of a customer during a taxable year, the customer
20            shall be deemed to be a customer in this State if
21            the billing address of the customer, as shown in
22            the records of the dealer, is in this State; or
23                (b) in all other cases, if the
24            income-producing activity of the taxpayer is
25            performed in this State or, if the
26            income-producing activity of the taxpayer is

 

 

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1            performed both within and without this State, if a
2            greater proportion of the income-producing
3            activity of the taxpayer is performed within this
4            State than in any other state, based on performance
5            costs.
6            (iv) Sales of services are in this State if the
7        services are received in this State. For the purposes
8        of this section, gross receipts from the performance of
9        services provided to a corporation, partnership, or
10        trust may only be attributed to a state where that
11        corporation, partnership, or trust has a fixed place of
12        business. If the state where the services are received
13        is not readily determinable or is a state where the
14        corporation, partnership, or trust receiving the
15        service does not have a fixed place of business, the
16        services shall be deemed to be received at the location
17        of the office of the customer from which the services
18        were ordered in the regular course of the customer's
19        trade or business. If the ordering office cannot be
20        determined, the services shall be deemed to be received
21        at the office of the customer to which the services are
22        billed. If the taxpayer is not taxable in the state in
23        which the services are received, the sale must be
24        excluded from both the numerator and the denominator of
25        the sales factor. The Department shall adopt rules
26        prescribing where specific types of service are

 

 

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1        received, including, but not limited to, publishing,
2        and utility service.
3        (D) For taxable years ending on or after December 31,
4    1995, the following items of income shall not be included
5    in the numerator or denominator of the sales factor:
6    dividends; amounts included under Section 78 of the
7    Internal Revenue Code; and Subpart F income as defined in
8    Section 952 of the Internal Revenue Code. No inference
9    shall be drawn from the enactment of this paragraph (D) in
10    construing this Section for taxable years ending before
11    December 31, 1995.
12        (E) Paragraphs (B-1) and (B-2) shall apply to tax years
13    ending on or after December 31, 1999, provided that a
14    taxpayer may elect to apply the provisions of these
15    paragraphs to prior tax years. Such election shall be made
16    in the form and manner prescribed by the Department, shall
17    be irrevocable, and shall apply to all tax years; provided
18    that, if a taxpayer's Illinois income tax liability for any
19    tax year, as assessed under Section 903 prior to January 1,
20    1999, was computed in a manner contrary to the provisions
21    of paragraphs (B-1) or (B-2), no refund shall be payable to
22    the taxpayer for that tax year to the extent such refund is
23    the result of applying the provisions of paragraph (B-1) or
24    (B-2) retroactively. In the case of a unitary business
25    group, such election shall apply to all members of such
26    group for every tax year such group is in existence, but

 

 

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1    shall not apply to any taxpayer for any period during which
2    that taxpayer is not a member of such group.
3    (b) Insurance companies.
4        (1) In general. Except as otherwise provided by
5    paragraph (2), business income of an insurance company for
6    a taxable year shall be apportioned to this State by
7    multiplying such income by a fraction, the numerator of
8    which is the direct premiums written for insurance upon
9    property or risk in this State, and the denominator of
10    which is the direct premiums written for insurance upon
11    property or risk everywhere. For purposes of this
12    subsection, the term "direct premiums written" means the
13    total amount of direct premiums written, assessments and
14    annuity considerations as reported for the taxable year on
15    the annual statement filed by the company with the Illinois
16    Director of Insurance in the form approved by the National
17    Convention of Insurance Commissioners or such other form as
18    may be prescribed in lieu thereof.
19        (2) Reinsurance. If the principal source of premiums
20    written by an insurance company consists of premiums for
21    reinsurance accepted by it, the business income of such
22    company shall be apportioned to this State by multiplying
23    such income by a fraction, the numerator of which is the
24    sum of (i) direct premiums written for insurance upon
25    property or risk in this State, plus (ii) premiums written
26    for reinsurance accepted in respect of property or risk in

 

 

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1    this State, and the denominator of which is the sum of
2    (iii) direct premiums written for insurance upon property
3    or risk everywhere, plus (iv) premiums written for
4    reinsurance accepted in respect of property or risk
5    everywhere. For purposes of this paragraph, premiums
6    written for reinsurance accepted in respect of property or
7    risk in this State, whether or not otherwise determinable,
8    may, at the election of the company, be determined on the
9    basis of the proportion which premiums written for
10    reinsurance accepted from companies commercially domiciled
11    in Illinois bears to premiums written for reinsurance
12    accepted from all sources, or, alternatively, in the
13    proportion which the sum of the direct premiums written for
14    insurance upon property or risk in this State by each
15    ceding company from which reinsurance is accepted bears to
16    the sum of the total direct premiums written by each such
17    ceding company for the taxable year. The election made by a
18    company under this paragraph for its first taxable year
19    ending on or after December 31, 2011, shall be binding for
20    that company for that taxable year and for all subsequent
21    taxable years, and may be altered only with the written
22    permission of the Department, which shall not be
23    unreasonably withheld.
24    (c) Financial organizations.
25        (1) In general. For taxable years ending before
26    December 31, 2008, business income of a financial

 

 

HB3157 Enrolled- 32 -LRB098 10600 HLH 40863 b

1    organization shall be apportioned to this State by
2    multiplying such income by a fraction, the numerator of
3    which is its business income from sources within this
4    State, and the denominator of which is its business income
5    from all sources. For the purposes of this subsection, the
6    business income of a financial organization from sources
7    within this State is the sum of the amounts referred to in
8    subparagraphs (A) through (E) following, but excluding the
9    adjusted income of an international banking facility as
10    determined in paragraph (2):
11            (A) Fees, commissions or other compensation for
12        financial services rendered within this State;
13            (B) Gross profits from trading in stocks, bonds or
14        other securities managed within this State;
15            (C) Dividends, and interest from Illinois
16        customers, which are received within this State;
17            (D) Interest charged to customers at places of
18        business maintained within this State for carrying
19        debit balances of margin accounts, without deduction
20        of any costs incurred in carrying such accounts; and
21            (E) Any other gross income resulting from the
22        operation as a financial organization within this
23        State. In computing the amounts referred to in
24        paragraphs (A) through (E) of this subsection, any
25        amount received by a member of an affiliated group
26        (determined under Section 1504(a) of the Internal

 

 

HB3157 Enrolled- 33 -LRB098 10600 HLH 40863 b

1        Revenue Code but without reference to whether any such
2        corporation is an "includible corporation" under
3        Section 1504(b) of the Internal Revenue Code) from
4        another member of such group shall be included only to
5        the extent such amount exceeds expenses of the
6        recipient directly related thereto.
7        (2) International Banking Facility. For taxable years
8    ending before December 31, 2008:
9            (A) Adjusted Income. The adjusted income of an
10        international banking facility is its income reduced
11        by the amount of the floor amount.
12            (B) Floor Amount. The floor amount shall be the
13        amount, if any, determined by multiplying the income of
14        the international banking facility by a fraction, not
15        greater than one, which is determined as follows:
16                (i) The numerator shall be:
17                The average aggregate, determined on a
18            quarterly basis, of the financial organization's
19            loans to banks in foreign countries, to foreign
20            domiciled borrowers (except where secured
21            primarily by real estate) and to foreign
22            governments and other foreign official
23            institutions, as reported for its branches,
24            agencies and offices within the state on its
25            "Consolidated Report of Condition", Schedule A,
26            Lines 2.c., 5.b., and 7.a., which was filed with

 

 

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1            the Federal Deposit Insurance Corporation and
2            other regulatory authorities, for the year 1980,
3            minus
4                The average aggregate, determined on a
5            quarterly basis, of such loans (other than loans of
6            an international banking facility), as reported by
7            the financial institution for its branches,
8            agencies and offices within the state, on the
9            corresponding Schedule and lines of the
10            Consolidated Report of Condition for the current
11            taxable year, provided, however, that in no case
12            shall the amount determined in this clause (the
13            subtrahend) exceed the amount determined in the
14            preceding clause (the minuend); and
15                (ii) the denominator shall be the average
16            aggregate, determined on a quarterly basis, of the
17            international banking facility's loans to banks in
18            foreign countries, to foreign domiciled borrowers
19            (except where secured primarily by real estate)
20            and to foreign governments and other foreign
21            official institutions, which were recorded in its
22            financial accounts for the current taxable year.
23            (C) Change to Consolidated Report of Condition and
24        in Qualification. In the event the Consolidated Report
25        of Condition which is filed with the Federal Deposit
26        Insurance Corporation and other regulatory authorities

 

 

HB3157 Enrolled- 35 -LRB098 10600 HLH 40863 b

1        is altered so that the information required for
2        determining the floor amount is not found on Schedule
3        A, lines 2.c., 5.b. and 7.a., the financial institution
4        shall notify the Department and the Department may, by
5        regulations or otherwise, prescribe or authorize the
6        use of an alternative source for such information. The
7        financial institution shall also notify the Department
8        should its international banking facility fail to
9        qualify as such, in whole or in part, or should there
10        be any amendment or change to the Consolidated Report
11        of Condition, as originally filed, to the extent such
12        amendment or change alters the information used in
13        determining the floor amount.
14        (3) For taxable years ending on or after December 31,
15    2008, the business income of a financial organization shall
16    be apportioned to this State by multiplying such income by
17    a fraction, the numerator of which is its gross receipts
18    from sources in this State or otherwise attributable to
19    this State's marketplace and the denominator of which is
20    its gross receipts everywhere during the taxable year.
21    "Gross receipts" for purposes of this subparagraph (3)
22    means gross income, including net taxable gain on
23    disposition of assets, including securities and money
24    market instruments, when derived from transactions and
25    activities in the regular course of the financial
26    organization's trade or business. The following examples

 

 

HB3157 Enrolled- 36 -LRB098 10600 HLH 40863 b

1    are illustrative:
2            (i) Receipts from the lease or rental of real or
3        tangible personal property are in this State if the
4        property is located in this State during the rental
5        period. Receipts from the lease or rental of tangible
6        personal property that is characteristically moving
7        property, including, but not limited to, motor
8        vehicles, rolling stock, aircraft, vessels, or mobile
9        equipment are from sources in this State to the extent
10        that the property is used in this State.
11            (ii) Interest income, commissions, fees, gains on
12        disposition, and other receipts from assets in the
13        nature of loans that are secured primarily by real
14        estate or tangible personal property are from sources
15        in this State if the security is located in this State.
16            (iii) Interest income, commissions, fees, gains on
17        disposition, and other receipts from consumer loans
18        that are not secured by real or tangible personal
19        property are from sources in this State if the debtor
20        is a resident of this State.
21            (iv) Interest income, commissions, fees, gains on
22        disposition, and other receipts from commercial loans
23        and installment obligations that are not secured by
24        real or tangible personal property are from sources in
25        this State if the proceeds of the loan are to be
26        applied in this State. If it cannot be determined where

 

 

HB3157 Enrolled- 37 -LRB098 10600 HLH 40863 b

1        the funds are to be applied, the income and receipts
2        are from sources in this State if the office of the
3        borrower from which the loan was negotiated in the
4        regular course of business is located in this State. If
5        the location of this office cannot be determined, the
6        income and receipts shall be excluded from the
7        numerator and denominator of the sales factor.
8            (v) Interest income, fees, gains on disposition,
9        service charges, merchant discount income, and other
10        receipts from credit card receivables are from sources
11        in this State if the card charges are regularly billed
12        to a customer in this State.
13            (vi) Receipts from the performance of services,
14        including, but not limited to, fiduciary, advisory,
15        and brokerage services, are in this State if the
16        services are received in this State within the meaning
17        of subparagraph (a)(3)(C-5)(iv) of this Section.
18            (vii) Receipts from the issuance of travelers
19        checks and money orders are from sources in this State
20        if the checks and money orders are issued from a
21        location within this State.
22            (viii) Receipts from investment assets and
23        activities and trading assets and activities are
24        included in the receipts factor as follows:
25                (1) Interest, dividends, net gains (but not
26            less than zero) and other income from investment

 

 

HB3157 Enrolled- 38 -LRB098 10600 HLH 40863 b

1            assets and activities from trading assets and
2            activities shall be included in the receipts
3            factor. Investment assets and activities and
4            trading assets and activities include but are not
5            limited to: investment securities; trading account
6            assets; federal funds; securities purchased and
7            sold under agreements to resell or repurchase;
8            options; futures contracts; forward contracts;
9            notional principal contracts such as swaps;
10            equities; and foreign currency transactions. With
11            respect to the investment and trading assets and
12            activities described in subparagraphs (A) and (B)
13            of this paragraph, the receipts factor shall
14            include the amounts described in such
15            subparagraphs.
16                    (A) The receipts factor shall include the
17                amount by which interest from federal funds
18                sold and securities purchased under resale
19                agreements exceeds interest expense on federal
20                funds purchased and securities sold under
21                repurchase agreements.
22                    (B) The receipts factor shall include the
23                amount by which interest, dividends, gains and
24                other income from trading assets and
25                activities, including but not limited to
26                assets and activities in the matched book, in

 

 

HB3157 Enrolled- 39 -LRB098 10600 HLH 40863 b

1                the arbitrage book, and foreign currency
2                transactions, exceed amounts paid in lieu of
3                interest, amounts paid in lieu of dividends,
4                and losses from such assets and activities.
5                (2) The numerator of the receipts factor
6            includes interest, dividends, net gains (but not
7            less than zero), and other income from investment
8            assets and activities and from trading assets and
9            activities described in paragraph (1) of this
10            subsection that are attributable to this State.
11                    (A) The amount of interest, dividends, net
12                gains (but not less than zero), and other
13                income from investment assets and activities
14                in the investment account to be attributed to
15                this State and included in the numerator is
16                determined by multiplying all such income from
17                such assets and activities by a fraction, the
18                numerator of which is the gross income from
19                such assets and activities which are properly
20                assigned to a fixed place of business of the
21                taxpayer within this State and the denominator
22                of which is the gross income from all such
23                assets and activities.
24                    (B) The amount of interest from federal
25                funds sold and purchased and from securities
26                purchased under resale agreements and

 

 

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1                securities sold under repurchase agreements
2                attributable to this State and included in the
3                numerator is determined by multiplying the
4                amount described in subparagraph (A) of
5                paragraph (1) of this subsection from such
6                funds and such securities by a fraction, the
7                numerator of which is the gross income from
8                such funds and such securities which are
9                properly assigned to a fixed place of business
10                of the taxpayer within this State and the
11                denominator of which is the gross income from
12                all such funds and such securities.
13                    (C) The amount of interest, dividends,
14                gains, and other income from trading assets and
15                activities, including but not limited to
16                assets and activities in the matched book, in
17                the arbitrage book and foreign currency
18                transactions (but excluding amounts described
19                in subparagraphs (A) or (B) of this paragraph),
20                attributable to this State and included in the
21                numerator is determined by multiplying the
22                amount described in subparagraph (B) of
23                paragraph (1) of this subsection by a fraction,
24                the numerator of which is the gross income from
25                such trading assets and activities which are
26                properly assigned to a fixed place of business

 

 

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1                of the taxpayer within this State and the
2                denominator of which is the gross income from
3                all such assets and activities.
4                    (D) Properly assigned, for purposes of
5                this paragraph (2) of this subsection, means
6                the investment or trading asset or activity is
7                assigned to the fixed place of business with
8                which it has a preponderance of substantive
9                contacts. An investment or trading asset or
10                activity assigned by the taxpayer to a fixed
11                place of business without the State shall be
12                presumed to have been properly assigned if:
13                        (i) the taxpayer has assigned, in the
14                    regular course of its business, such asset
15                    or activity on its records to a fixed place
16                    of business consistent with federal or
17                    state regulatory requirements;
18                        (ii) such assignment on its records is
19                    based upon substantive contacts of the
20                    asset or activity to such fixed place of
21                    business; and
22                        (iii) the taxpayer uses such records
23                    reflecting assignment of such assets or
24                    activities for the filing of all state and
25                    local tax returns for which an assignment
26                    of such assets or activities to a fixed

 

 

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1                    place of business is required.
2                    (E) The presumption of proper assignment
3                of an investment or trading asset or activity
4                provided in subparagraph (D) of paragraph (2)
5                of this subsection may be rebutted upon a
6                showing by the Department, supported by a
7                preponderance of the evidence, that the
8                preponderance of substantive contacts
9                regarding such asset or activity did not occur
10                at the fixed place of business to which it was
11                assigned on the taxpayer's records. If the
12                fixed place of business that has a
13                preponderance of substantive contacts cannot
14                be determined for an investment or trading
15                asset or activity to which the presumption in
16                subparagraph (D) of paragraph (2) of this
17                subsection does not apply or with respect to
18                which that presumption has been rebutted, that
19                asset or activity is properly assigned to the
20                state in which the taxpayer's commercial
21                domicile is located. For purposes of this
22                subparagraph (E), it shall be presumed,
23                subject to rebuttal, that taxpayer's
24                commercial domicile is in the state of the
25                United States or the District of Columbia to
26                which the greatest number of employees are

 

 

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1                regularly connected with the management of the
2                investment or trading income or out of which
3                they are working, irrespective of where the
4                services of such employees are performed, as of
5                the last day of the taxable year.
6        (4) (Blank).
7        (5) (Blank).
8    (c-1) Federally regulated exchanges. For taxable years
9ending on or after December 31, 2012, business income of a
10federally regulated exchange shall, at the option of the
11federally regulated exchange, be apportioned to this State by
12multiplying such income by a fraction, the numerator of which
13is its business income from sources within this State, and the
14denominator of which is its business income from all sources.
15For purposes of this subsection, the business income within
16this State of a federally regulated exchange is the sum of the
17following:
18        (1) Receipts attributable to transactions executed on
19    a physical trading floor if that physical trading floor is
20    located in this State.
21        (2) Receipts attributable to all other matching,
22    execution, or clearing transactions, including without
23    limitation receipts from the provision of matching,
24    execution, or clearing services to another entity,
25    multiplied by (i) for taxable years ending on or after
26    December 31, 2012 but before December 31, 2013, 63.77%; and

 

 

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1    (ii) for taxable years ending on or after December 31,
2    2013, 27.54%.
3        (3) All other receipts not governed by subparagraphs
4    (1) or (2) of this subsection (c-1), to the extent the
5    receipts would be characterized as "sales in this State"
6    under item (3) of subsection (a) of this Section.
7    "Federally regulated exchange" means (i) a "registered
8entity" within the meaning of 7 U.S.C. Section 1a(40)(A), (B),
9or (C), (ii) an "exchange" or "clearing agency" within the
10meaning of 15 U.S.C. Section 78c (a)(1) or (23), (iii) any such
11entities regulated under any successor regulatory structure to
12the foregoing, and (iv) all taxpayers who are members of the
13same unitary business group as a federally regulated exchange,
14determined without regard to the prohibition in Section
151501(a)(27) of this Act against including in a unitary business
16group taxpayers who are ordinarily required to apportion
17business income under different subsections of this Section;
18provided that this subparagraph (iv) shall apply only if 50% or
19more of the business receipts of the unitary business group
20determined by application of this subparagraph (iv) for the
21taxable year are attributable to the matching, execution, or
22clearing of transactions conducted by an entity described in
23subparagraph (i), (ii), or (iii) of this paragraph.
24    In no event shall the Illinois apportionment percentage
25computed in accordance with this subsection (c-1) for any
26taxpayer for any tax year be less than the Illinois

 

 

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1apportionment percentage computed under this subsection (c-1)
2for that taxpayer for the first full tax year ending on or
3after December 31, 2013 for which this subsection (c-1) applied
4to the taxpayer.
5    (d) Transportation services. For taxable years ending
6before December 31, 2008, business income derived from
7furnishing transportation services shall be apportioned to
8this State in accordance with paragraphs (1) and (2):
9        (1) Such business income (other than that derived from
10    transportation by pipeline) shall be apportioned to this
11    State by multiplying such income by a fraction, the
12    numerator of which is the revenue miles of the person in
13    this State, and the denominator of which is the revenue
14    miles of the person everywhere. For purposes of this
15    paragraph, a revenue mile is the transportation of 1
16    passenger or 1 net ton of freight the distance of 1 mile
17    for a consideration. Where a person is engaged in the
18    transportation of both passengers and freight, the
19    fraction above referred to shall be determined by means of
20    an average of the passenger revenue mile fraction and the
21    freight revenue mile fraction, weighted to reflect the
22    person's
23            (A) relative railway operating income from total
24        passenger and total freight service, as reported to the
25        Interstate Commerce Commission, in the case of
26        transportation by railroad, and

 

 

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1            (B) relative gross receipts from passenger and
2        freight transportation, in case of transportation
3        other than by railroad.
4        (2) Such business income derived from transportation
5    by pipeline shall be apportioned to this State by
6    multiplying such income by a fraction, the numerator of
7    which is the revenue miles of the person in this State, and
8    the denominator of which is the revenue miles of the person
9    everywhere. For the purposes of this paragraph, a revenue
10    mile is the transportation by pipeline of 1 barrel of oil,
11    1,000 cubic feet of gas, or of any specified quantity of
12    any other substance, the distance of 1 mile for a
13    consideration.
14        (3) For taxable years ending on or after December 31,
15    2008, business income derived from providing
16    transportation services other than airline services shall
17    be apportioned to this State by using a fraction, (a) the
18    numerator of which shall be (i) all receipts from any
19    movement or shipment of people, goods, mail, oil, gas, or
20    any other substance (other than by airline) that both
21    originates and terminates in this State, plus (ii) that
22    portion of the person's gross receipts from movements or
23    shipments of people, goods, mail, oil, gas, or any other
24    substance (other than by airline) that originates in one
25    state or jurisdiction and terminates in another state or
26    jurisdiction, that is determined by the ratio that the

 

 

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1    miles traveled in this State bears to total miles
2    everywhere and (b) the denominator of which shall be all
3    revenue derived from the movement or shipment of people,
4    goods, mail, oil, gas, or any other substance (other than
5    by airline). Where a taxpayer is engaged in the
6    transportation of both passengers and freight, the
7    fraction above referred to shall first be determined
8    separately for passenger miles and freight miles. Then an
9    average of the passenger miles fraction and the freight
10    miles fraction shall be weighted to reflect the taxpayer's:
11            (A) relative railway operating income from total
12        passenger and total freight service, as reported to the
13        Surface Transportation Board, in the case of
14        transportation by railroad; and
15            (B) relative gross receipts from passenger and
16        freight transportation, in case of transportation
17        other than by railroad.
18        (4) For taxable years ending on or after December 31,
19    2008, business income derived from furnishing airline
20    transportation services shall be apportioned to this State
21    by multiplying such income by a fraction, the numerator of
22    which is the revenue miles of the person in this State, and
23    the denominator of which is the revenue miles of the person
24    everywhere. For purposes of this paragraph, a revenue mile
25    is the transportation of one passenger or one net ton of
26    freight the distance of one mile for a consideration. If a

 

 

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1    person is engaged in the transportation of both passengers
2    and freight, the fraction above referred to shall be
3    determined by means of an average of the passenger revenue
4    mile fraction and the freight revenue mile fraction,
5    weighted to reflect the person's relative gross receipts
6    from passenger and freight airline transportation.
7    (e) Combined apportionment. Where 2 or more persons are
8engaged in a unitary business as described in subsection
9(a)(27) of Section 1501, a part of which is conducted in this
10State by one or more members of the group, the business income
11attributable to this State by any such member or members shall
12be apportioned by means of the combined apportionment method.
13    (f) Alternative allocation. If the allocation and
14apportionment provisions of subsections (a) through (e) and of
15subsection (h) do not, for taxable years ending before December
1631, 2008, fairly represent the extent of a person's business
17activity in this State, or, for taxable years ending on or
18after December 31, 2008, fairly represent the market for the
19person's goods, services, or other sources of business income,
20the person may petition for, or the Director may, without a
21petition, permit or require, in respect of all or any part of
22the person's business activity, if reasonable:
23        (1) Separate accounting;
24        (2) The exclusion of any one or more factors;
25        (3) The inclusion of one or more additional factors
26    which will fairly represent the person's business

 

 

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1    activities or market in this State; or
2        (4) The employment of any other method to effectuate an
3    equitable allocation and apportionment of the person's
4    business income.
5    (g) Cross reference. For allocation of business income by
6residents, see Section 301(a).
7    (h) For tax years ending on or after December 31, 1998, the
8apportionment factor of persons who apportion their business
9income to this State under subsection (a) shall be equal to:
10        (1) for tax years ending on or after December 31, 1998
11    and before December 31, 1999, 16 2/3% of the property
12    factor plus 16 2/3% of the payroll factor plus 66 2/3% of
13    the sales factor;
14        (2) for tax years ending on or after December 31, 1999
15    and before December 31, 2000, 8 1/3% of the property factor
16    plus 8 1/3% of the payroll factor plus 83 1/3% of the sales
17    factor;
18        (3) for tax years ending on or after December 31, 2000,
19    the sales factor.
20If, in any tax year ending on or after December 31, 1998 and
21before December 31, 2000, the denominator of the payroll,
22property, or sales factor is zero, the apportionment factor
23computed in paragraph (1) or (2) of this subsection for that
24year shall be divided by an amount equal to 100% minus the
25percentage weight given to each factor whose denominator is
26equal to zero.

 

 

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1(Source: P.A. 96-763, eff. 8-25-09; 97-507, eff. 8-23-11;
297-636, eff. 6-1-12.)
 
3    (35 ILCS 5/502)  (from Ch. 120, par. 5-502)
4    Sec. 502. Returns and notices.
5    (a) In general. A return with respect to the taxes imposed
6by this Act shall be made by every person for any taxable year:
7        (1) for which such person is liable for a tax imposed
8    by this Act, or
9        (2) in the case of a resident or in the case of a
10    corporation which is qualified to do business in this
11    State, for which such person is required to make a federal
12    income tax return, regardless of whether such person is
13    liable for a tax imposed by this Act. However, this
14    paragraph shall not require a resident to make a return if
15    such person has an Illinois base income of the basic amount
16    in Section 204(b) or less and is either claimed as a
17    dependent on another person's tax return under the Internal
18    Revenue Code, or is claimed as a dependent on another
19    person's tax return under this Act.
20    Notwithstanding the provisions of paragraph (1), a
21nonresident (other than, for taxable years ending on or after
22December 31, 2011, a nonresident required to withhold tax under
23Section 709.5) whose Illinois income tax liability under
24subsections (a), (b), (c), and (d) of Section 201 of this Act
25is paid in full after taking into account the credits allowed

 

 

HB3157 Enrolled- 51 -LRB098 10600 HLH 40863 b

1under subsection (f) of this Section or allowed under Section
2709.5 of this Act shall not be required to file a return under
3this subsection (a).
4    (b) Fiduciaries and receivers.
5        (1) Decedents. If an individual is deceased, any return
6    or notice required of such individual under this Act shall
7    be made by his executor, administrator, or other person
8    charged with the property of such decedent.
9        (2) Individuals under a disability. If an individual is
10    unable to make a return or notice required under this Act,
11    the return or notice required of such individual shall be
12    made by his duly authorized agent, guardian, fiduciary or
13    other person charged with the care of the person or
14    property of such individual.
15        (3) Estates and trusts. Returns or notices required of
16    an estate or a trust shall be made by the fiduciary
17    thereof.
18        (4) Receivers, trustees and assignees for
19    corporations. In a case where a receiver, trustee in
20    bankruptcy, or assignee, by order of a court of competent
21    jurisdiction, by operation of law, or otherwise, has
22    possession of or holds title to all or substantially all
23    the property or business of a corporation, whether or not
24    such property or business is being operated, such receiver,
25    trustee, or assignee shall make the returns and notices
26    required of such corporation in the same manner and form as

 

 

HB3157 Enrolled- 52 -LRB098 10600 HLH 40863 b

1    corporations are required to make such returns and notices.
2    (c) Joint returns by husband and wife.
3        (1) Except as provided in paragraph (3):
4            (A) if a husband and wife file a joint federal
5        income tax return for a taxable year ending before
6        December 31, 2009, they shall file a joint return under
7        this Act for such taxable year and their liabilities
8        shall be joint and several;
9            (B) if a husband and wife file a joint federal
10        income tax return for a taxable year ending on or after
11        December 31, 2009, they may elect to file separate
12        returns under this Act for such taxable year. The
13        election under this paragraph must be made on or before
14        the due date (including extensions) of the return and,
15        once made, shall be irrevocable. If no election is
16        timely made under this paragraph for a taxable year:
17                (i) the couple must file a joint return under
18            this Act for such taxable year,
19                (ii) their liabilities shall be joint and
20            several, and
21                (iii) any overpayment for that taxable year
22            may be withheld under Section 909 of this Act or
23            under Section 2505-275 of the Civil Administrative
24            Code of Illinois and applied against a debt of
25            either spouse without regard to the amount of the
26            overpayment attributable to the other spouse; and

 

 

HB3157 Enrolled- 53 -LRB098 10600 HLH 40863 b

1            (C) if the federal income tax liability of either
2        spouse is determined on a separate federal income tax
3        return, they shall file separate returns under this
4        Act.
5        (2) If neither spouse is required to file a federal
6    income tax return and either or both are required to file a
7    return under this Act, they may elect to file separate or
8    joint returns and pursuant to such election their
9    liabilities shall be separate or joint and several.
10        (3) If either husband or wife is a resident and the
11    other is a nonresident, they shall file separate returns in
12    this State on such forms as may be required by the
13    Department in which event their tax liabilities shall be
14    separate; but if they file a joint federal income tax
15    return for a taxable year, they may elect to determine
16    their joint net income and file a joint return for that
17    taxable year under the provisions of paragraph (1) of this
18    subsection as if both were residents and in such case,
19    their liabilities shall be joint and several.
20        (4) Innocent spouses.
21            (A) However, for tax liabilities arising and paid
22        prior to August 13, 1999, an innocent spouse shall be
23        relieved of liability for tax (including interest and
24        penalties) for any taxable year for which a joint
25        return has been made, upon submission of proof that the
26        Internal Revenue Service has made a determination

 

 

HB3157 Enrolled- 54 -LRB098 10600 HLH 40863 b

1        under Section 6013(e) of the Internal Revenue Code, for
2        the same taxable year, which determination relieved
3        the spouse from liability for federal income taxes. If
4        there is no federal income tax liability at issue for
5        the same taxable year, the Department shall rely on the
6        provisions of Section 6013(e) to determine whether the
7        person requesting innocent spouse abatement of tax,
8        penalty, and interest is entitled to that relief.
9            (B) For tax liabilities arising on and after August
10        13, 1999 or which arose prior to that date, but remain
11        unpaid as of that date, if an individual who filed a
12        joint return for any taxable year has made an election
13        under this paragraph, the individual's liability for
14        any tax shown on the joint return shall not exceed the
15        individual's separate return amount and the
16        individual's liability for any deficiency assessed for
17        that taxable year shall not exceed the portion of the
18        deficiency properly allocable to the individual. For
19        purposes of this paragraph:
20                (i) An election properly made pursuant to
21            Section 6015 of the Internal Revenue Code shall
22            constitute an election under this paragraph,
23            provided that the election shall not be effective
24            until the individual has notified the Department
25            of the election in the form and manner prescribed
26            by the Department.

 

 

HB3157 Enrolled- 55 -LRB098 10600 HLH 40863 b

1                (ii) If no election has been made under Section
2            6015, the individual may make an election under
3            this paragraph in the form and manner prescribed by
4            the Department, provided that no election may be
5            made if the Department finds that assets were
6            transferred between individuals filing a joint
7            return as part of a scheme by such individuals to
8            avoid payment of Illinois income tax and the
9            election shall not eliminate the individual's
10            liability for any portion of a deficiency
11            attributable to an error on the return of which the
12            individual had actual knowledge as of the date of
13            filing.
14                (iii) In determining the separate return
15            amount or portion of any deficiency attributable
16            to an individual, the Department shall follow the
17            provisions in subsections (c) and (d) of Section
18            6015 of the Internal Revenue Code.
19                (iv) In determining the validity of an
20            individual's election under subparagraph (ii) and
21            in determining an electing individual's separate
22            return amount or portion of any deficiency under
23            subparagraph (iii), any determination made by the
24            Secretary of the Treasury, by the United States Tax
25            Court on petition for review of a determination by
26            the Secretary of the Treasury, or on appeal from

 

 

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1            the United States Tax Court under Section 6015 of
2            the Internal Revenue Code regarding criteria for
3            eligibility or under subsection (d) of Section
4            6015 of the Internal Revenue Code regarding the
5            allocation of any item of income, deduction,
6            payment, or credit between an individual making
7            the federal election and that individual's spouse
8            shall be conclusively presumed to be correct. With
9            respect to any item that is not the subject of a
10            determination by the Secretary of the Treasury or
11            the federal courts, in any proceeding involving
12            this subsection, the individual making the
13            election shall have the burden of proof with
14            respect to any item except that the Department
15            shall have the burden of proof with respect to
16            items in subdivision (ii).
17                (v) Any election made by an individual under
18            this subsection shall apply to all years for which
19            that individual and the spouse named in the
20            election have filed a joint return.
21                (vi) After receiving a notice that the federal
22            election has been made or after receiving an
23            election under subdivision (ii), the Department
24            shall take no collection action against the
25            electing individual for any liability arising from
26            a joint return covered by the election until the

 

 

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1            Department has notified the electing individual in
2            writing that the election is invalid or of the
3            portion of the liability the Department has
4            allocated to the electing individual. Within 60
5            days (150 days if the individual is outside the
6            United States) after the issuance of such
7            notification, the individual may file a written
8            protest of the denial of the election or of the
9            Department's determination of the liability
10            allocated to him or her and shall be granted a
11            hearing within the Department under the provisions
12            of Section 908. If a protest is filed, the
13            Department shall take no collection action against
14            the electing individual until the decision
15            regarding the protest has become final under
16            subsection (d) of Section 908 or, if
17            administrative review of the Department's decision
18            is requested under Section 1201, until the
19            decision of the court becomes final.
20    (d) Partnerships. Every partnership having any base income
21allocable to this State in accordance with section 305(c) shall
22retain information concerning all items of income, gain, loss
23and deduction; the names and addresses of all of the partners,
24or names and addresses of members of a limited liability
25company, or other persons who would be entitled to share in the
26base income of the partnership if distributed; the amount of

 

 

HB3157 Enrolled- 58 -LRB098 10600 HLH 40863 b

1the distributive share of each; and such other pertinent
2information as the Department may by forms or regulations
3prescribe. The partnership shall make that information
4available to the Department when requested by the Department.
5    (e) For taxable years ending on or after December 31, 1985,
6and before December 31, 1993, taxpayers that are corporations
7(other than Subchapter S corporations) having the same taxable
8year and that are members of the same unitary business group
9may elect to be treated as one taxpayer for purposes of any
10original return, amended return which includes the same
11taxpayers of the unitary group which joined in the election to
12file the original return, extension, claim for refund,
13assessment, collection and payment and determination of the
14group's tax liability under this Act. This subsection (e) does
15not permit the election to be made for some, but not all, of
16the purposes enumerated above. For taxable years ending on or
17after December 31, 1987, corporate members (other than
18Subchapter S corporations) of the same unitary business group
19making this subsection (e) election are not required to have
20the same taxable year.
21    For taxable years ending on or after December 31, 1993,
22taxpayers that are corporations (other than Subchapter S
23corporations) and that are members of the same unitary business
24group shall be treated as one taxpayer for purposes of any
25original return, amended return which includes the same
26taxpayers of the unitary group which joined in filing the

 

 

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1original return, extension, claim for refund, assessment,
2collection and payment and determination of the group's tax
3liability under this Act.
4    (f) For taxable years ending prior to December 31, 2014,
5the The Department may promulgate regulations to permit
6nonresident individual partners of the same partnership,
7nonresident Subchapter S corporation shareholders of the same
8Subchapter S corporation, and nonresident individuals
9transacting an insurance business in Illinois under a Lloyds
10plan of operation, and nonresident individual members of the
11same limited liability company that is treated as a partnership
12under Section 1501 (a)(16) of this Act, to file composite
13individual income tax returns reflecting the composite income
14of such individuals allocable to Illinois and to make composite
15individual income tax payments. For taxable years ending prior
16to December 31, 2014, the The Department may by regulation also
17permit such composite returns to include the income tax owed by
18Illinois residents attributable to their income from
19partnerships, Subchapter S corporations, insurance businesses
20organized under a Lloyds plan of operation, or limited
21liability companies that are treated as partnership under
22Section 1501(a)(16) of this Act, in which case such Illinois
23residents will be permitted to claim credits on their
24individual returns for their shares of the composite tax
25payments. This paragraph of subsection (f) applies to taxable
26years ending on or after December 31, 1987 and ending prior to

 

 

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1December 31, 2014.
2    For taxable years ending on or after December 31, 1999, the
3Department may, by regulation, also permit any persons
4transacting an insurance business organized under a Lloyds plan
5of operation to file composite returns reflecting the income of
6such persons allocable to Illinois and the tax rates applicable
7to such persons under Section 201 and to make composite tax
8payments and shall, by regulation, also provide that the income
9and apportionment factors attributable to the transaction of an
10insurance business organized under a Lloyds plan of operation
11by any person joining in the filing of a composite return
12shall, for purposes of allocating and apportioning income under
13Article 3 of this Act and computing net income under Section
14202 of this Act, be excluded from any other income and
15apportionment factors of that person or of any unitary business
16group, as defined in subdivision (a)(27) of Section 1501, to
17which that person may belong.
18    For taxable years ending on or after December 31, 2008,
19every nonresident shall be allowed a credit against his or her
20liability under subsections (a) and (b) of Section 201 for any
21amount of tax reported on a composite return and paid on his or
22her behalf under this subsection (f). Residents (other than
23persons transacting an insurance business organized under a
24Lloyds plan of operation) may claim a credit for taxes reported
25on a composite return and paid on their behalf under this
26subsection (f) only as permitted by the Department by rule.

 

 

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1    (f-5) For taxable years ending on or after December 31,
22008, the Department may adopt rules to provide that, when a
3partnership or Subchapter S corporation has made an error in
4determining the amount of any item of income, deduction,
5addition, subtraction, or credit required to be reported on its
6return that affects the liability imposed under this Act on a
7partner or shareholder, the partnership or Subchapter S
8corporation may report the changes in liabilities of its
9partners or shareholders and claim a refund of the resulting
10overpayments, or pay the resulting underpayments, on behalf of
11its partners and shareholders.
12    (g) The Department may adopt rules to authorize the
13electronic filing of any return required to be filed under this
14Section.
15(Source: P.A. 96-520, eff. 8-14-09; 97-507, eff. 8-23-11.)
 
16    (35 ILCS 5/709.5)
17    Sec. 709.5. Withholding by partnerships, Subchapter S
18corporations, and trusts.
19    (a) In general. For each taxable year ending on or after
20December 31, 2008, every partnership (other than a publicly
21traded partnership under Section 7704 of the Internal Revenue
22Code or investment partnership), Subchapter S corporation, and
23trust must withhold from each nonresident partner,
24shareholder, or beneficiary (other than a partner,
25shareholder, or beneficiary who is exempt from tax under

 

 

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1Section 501(a) of the Internal Revenue Code or under Section
2205 of this Act, who is included on a composite return filed by
3the partnership or Subchapter S corporation for the taxable
4year under subsection (f) of Section 502 of this Act), or who
5is a retired partner, to the extent that partner's
6distributions are exempt from tax under Section 203(a)(2)(F) of
7this Act) an amount equal to the sum distributable share of (i)
8the share of business income of the partnership, Subchapter S
9corporation, or trust apportionable to Illinois plus (ii) for
10taxable years ending on or after December 31, 2014, the share
11of nonbusiness income of the partnership, Subchapter S
12corporation, or trust allocated to Illinois under Section 303
13of this Act (other than an amount allocated to the commercial
14domicile of the taxpayer under Section 303 of this Act) that is
15distributable to of that partner, shareholder, or beneficiary
16under Sections 702 and 704 and Subchapter S of the Internal
17Revenue Code, whether or not distributed, (iii) multiplied by
18the applicable rates of tax for that partner, or shareholder,
19or beneficiary under subsections (a) through (d) of Section 201
20of this Act, and (iv) net of the share of any credit under
21Article 2 of this Act that is distributable by the partnership,
22Subchapter S corporation, or trust and allowable against the
23tax liability of that partner, shareholder, or beneficiary for
24a taxable year ending on or after December 31, 2014.
25    (b) Credit for taxes withheld. Any amount withheld under
26subsection (a) of this Section and paid to the Department shall

 

 

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1be treated as a payment of the estimated tax liability or of
2the liability for withholding under this Section of the
3partner, shareholder, or beneficiary to whom the income is
4distributable for the taxable year in which that person
5incurred a liability under this Act with respect to that
6income. The Department shall adopt rules pursuant to which a
7partner, shareholder, or beneficiary may claim a credit against
8its obligation for withholding under this Section for amounts
9withheld under this Section with respect to income
10distributable to it by a partnership, Subchapter S corporation,
11or trust and allowing its partners, shareholders, or
12beneficiaries to claim a credit under this subsection (b) for
13those withheld amounts.
14    (c) Exemption from withholding.
15        (1) A partnership, Subchapter S corporation, or trust
16    shall not be required to withhold tax under subsection (a)
17    of this Section with respect to any nonresident partner,
18    shareholder, or beneficiary (other than an individual)
19    from whom the partnership, S corporation, or trust has
20    received a certificate, completed in the form and manner
21    prescribed by the Department, stating that such
22    nonresident partner, shareholder, or beneficiary shall:
23            (A) file all returns that the partner,
24        shareholder, or beneficiary is required to file under
25        Section 502 of this Act and make timely payment of all
26        taxes imposed under Section 201 of this Act or under

 

 

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1        this Section on the partner, shareholder, or
2        beneficiary with respect to income of the partnership,
3        S corporation, or trust; and
4            (B) be subject to personal jurisdiction in this
5        State for purposes of the collection of income taxes,
6        together with related interest and penalties, imposed
7        on the partner, shareholder, or beneficiary with
8        respect to the income of the partnership, S
9        corporation, or trust.
10        (2) The Department may revoke the exemption provided by
11    this subsection (c) at any time that it determines that the
12    nonresident partner, shareholder, or beneficiary is not
13    abiding by the terms of the certificate. The Department
14    shall notify the partnership, S corporation, or trust that
15    it has revoked a certificate by notice left at the usual
16    place of business of the partnership, S corporation, or
17    trust or by mail to the last known address of the
18    partnership, S corporation, or trust.
19        (3) A partnership, S corporation, or trust that
20    receives a certificate under this subsection (c) properly
21    completed by a nonresident partner, shareholder, or
22    beneficiary shall not be required to withhold any amount
23    from that partner, shareholder, or beneficiary, the
24    payment of which would be due under Section 711(a-5) of
25    this Act after the receipt of the certificate and no
26    earlier than 60 days after the Department has notified the

 

 

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1    partnership, S corporation, or trust that the certificate
2    has been revoked.
3        (4) Certificates received by a the partnership, S
4    corporation, or trust under this subsection (c) must be
5    retained by the partnership, S corporation, or trust and a
6    record of such certificates must be provided to the
7    Department, in a format in which the record is available
8    for review by the Department, upon request by the
9    Department. The Department may, by rule, require the record
10    of certificates to be maintained and provided to the
11    Department electronically.
12(Source: P.A. 97-507, eff. 8-23-11.)